Barbara  i^einstoctt  Lectures'  on 
Jftorate  of  CraUe 


HIGHER  EDUCATION  AND  BUSINESS 
STANDARDS.  By  WILLARD  EUGENB 

HOTCHKISS. 

CREATING  CAPITAL:  MONEY-MAKING 
AS  AN  AIM  IN  BUSINESS.  By  FREDERICK 

L.    LlPMAN. 

IS  CIVILIZATION  A  DISEASE?  By  STAN- 
TON  COIT. 

SOCIAL  JUSTICE  WITHOUT  SOCIALISM. 
By  JOHN  BATES  CLARK. 

THE  CONFLICT  BETWEEN  PRIVATE  MO- 
NOPOLY AND  GOOD  CITIZENSHIP.  By 
JOHN  GRAHAM  BROOKS. 

COMMERCIALISM  AND  JOURNALISM.  By 
HAMILTON  HOLT. 

THE  BUSINESS  CAREER  IN  ITS  PUBLIC 
RELATIONS.  By  ALBERT  SHAW. 


HIGHER   EDUCATION 
AND    BUSINESS   STANDARDS 


HIGHER  EDUCATION 

AND 
BUSINESS    STANDARDS 


BY 


WILLARD   EUGENE  JIOTCHKISS 

DIRECTOR    OF   BUSINESS   EDUCATION 
AT  THE  UNIVERSITY  OF  MINNESOTA 


BOSTON  AND  NEW  YORK 
HOUGHTON  MIFFLIN  COMPANY 

d&e  fiitoer?'ibe  press  Cambridge 
1918 


COPYRIGHT,   1918,  BY  THE  REGENTS  OF  THE  UNIVERSITY  OF 
CALIFORNIA 

ALL  RIGHTS  RESERVED 

Published  March  igi8 


HF 


BARBARA  WONSTOOC 

LECTURES  ON  THE  MORALS 

OF  TRADE 

This  series  wifl  contain  essays  by 
representative  scholars  and  men  of 
affairs  dealing  with  the  various  phases 
of  the  moral  law  in  its  bearing  on 
business  life  under  the  new  economic 
order,  first  delivered  at  the  University 
of  California  on  the  Weinstock  founda- 
tion. 


HIGHER   EDUCATION  AND 
BUSINESS  STANDARDS 

LAST  summer,  when  we  reached 
California  for  a  year's  sojourn,  we 
had  the  good  fortune  to  secure  a  house 
with  a  splendid  garden.  A  few  weeks 
ago,  after  the  early  warm  days  of  a  Cali- 
fornia February  had  opened  up  the  first 
blossoms  of  the  season,  our  little  five-year- 
old  discovered  that  the  garden  furnished 
a  fine  outlet  for  her  enterprise,  and  she 
soon  produced  two  gorgeous  —  I  will 
not  say  beautiful  —  bouquets.  Barring 
a  certain  doubt  about  her  mother's  ap- 
proval, she  was  well  satisfied  with  her 


a      HIGHER  EDUCATION  AND 

achievement,  she  felt  a  sense  of  com- 
pleteness in  what  she  had  done — and 
well  she  might,  for  she  had  not  left  a 
visible  bud. 

There  is  a  strong  tendency  to  go  at 
business  the  way  Helen  went  at  the  gar- 
den. She  knew  what  to  do  with  bou- 
quets; raw  material  for  making  them 
was  within  her  reach ;  what  more  natu- 
ral than  to  turn  it,  in  the  most  obvious 
and  simple  way,  into  the  product  for 
which  it  was  designed.  From  her  stand- 
point such  a  procedure  was  entirely  cor- 
rect—  she  was  making  bouquets  for 
herself  and  her  friends;  every  one  in 
her  circle  would  share  the  benefit  of 
her  industry. 

Whenever  in  the  past  business  enter- 


BUSINESS  STANDARDS          3 

prise  has  proceeded  from  a  similar  view- 
point, we  have  stood  aside  and  let  it  pro- 
ceed; it  was  not  our  garden;  we  were 
quite  willing  to  take  the  role  of  disinter- 
ested spectators.  Recently  we  have  dis- 
covered that  it  is  our  garden;  we  have 
learned  that  we  are  not  disinterested; 
we  now  see  that  business  plays  a  large 
part  in  the  life  of  every  one  of  us.  That 
being  the  case,  we  assume  the  right  to 
question  its  processes,  its  underlying  poli- 
cies, and  its  results.  We  are  gradually 
coming  to  think  of  business  in  terms  of 
an  integrated  and  unified  national  life. 
We  desire  the  national  life  to  be  both 
wholesome  and  secure. 

What  the  public  really  wants  from 
business,  then,  is  a  contribution  to  na- 


4      HIGHER  EDUCATION   AND 

tional  welfare,  and  it  has  become  con- 
vinced that,  by  taking  thought,  it  can 
make  the  contribution  more  certain  and 
more  uniform  than  it  has  been  in  the 
past.  Many  business  men  share  this  view ; 
with  varying  zeal  they  are  trying  to  work 
out  standards  of  organization  that  will 
insure  the  kind  of  regard  for  general 
welfare  which  the  public  has  come  to 
demand. 

This  is  the  new  idea  in  business;  it 
has  already  taken  deep  root ;  but  it  needs 
to  be  further  developed.  We  have  the 
difficult  task  of  reducing  an  idea  to  a 
practical  working  plan.  How  shall  we 
go  about  it  ?  Fortunately  the  idea  itself 
contains  a  hint  for  further  procedure. 
A  new  attitude  in  business  must  be 


BUSINESS  STANDARDS          5 

coupled  with  a  new  attitude  in  public 
policy. 

When  my  enterprising  child  made  an 
onslaught  on  the  garden  it  would  have 
been  easy  enough  to  punish  her;  but  it 
is  doubtful  if  mere  punishment  gets  very 
far  in  a  case  of  that  sort.  Unless  we  can 
teach  the  child  to  enjoy  the  garden  with- 
out destroying  it,  the  restraining  influ- 
ence of  punishment  will  be  no  stronger 
than  the  memory  of  its  pain  or  the 
fear  of  its  repetition.  This  memory  of 
the  past  and  fear  of  the  future  usually 
wage  a  most  unequal  contest  with  the. 
vivid  and  alluring  temptation  of  the 
present. 

But  should  not  the  child  be  restrained  ? 
As  far  as  necessary  to  protect  the  garden, 


6      HIGHER  EDUCATION  AND 

and  perhaps  also  to  make  her  conscious 
of  an  authority  in  the  world  outside  of 
her  own  will,  yes  —  but  that  is  not  the 
main  task.  The  main  task  is  to  educate 
her,  to  develop  an  understanding  of  the 
garden,  to  get  her  in  the  frame  of  mind 
in  which  she  will  derive  her  greatest  en- 
joyment when  she  cultivates  it  and  sees 
it  grow,  and  when  she  restricts  her  pick- 
ing to  a  reasonable  share  of  what  the  gar- 
den produces. 

In  the  actual  case  before  us,  the  child 
was  after  quick  and  easy  results,  the  only 
kind  she  could  comprehend ;  she  was  un- 
able to  look  upon  the  garden  as  a  living 
thing  whose  life  and  health  must  be  pre- 
served to-day  in  order  that  it  may  yield 
returns  to-morrow  and  next  week.  An- 


BUSINESS  STANDARDS  7 
alyzed  with  adult  understanding,  her  es- 
sential fault  was  a  failure  to  get  beyond 
immediate  results  and  to  view  the  garden 
from  a  long-time  angle.  We  ought  not 
to  expect  her  to  do  this  now,  but  we  do 
expect  her  to  do  it  when  she  is  grown 
up.  We  expect  in  time  so  to  educate  her 
that  she  will  be  able  to  think  of  the  gar- 
den in  terms  of  permanence  and  growth 
and  to  make  an  effective  use  of  it  from 
that  standpoint ;  and  this  same  education 
in  long-time  effectiveness  is  what  we 
want  in  business. 

Business  standards  must  be  discussed 
from  the  standpoint  of  efficiency,  but 
efficiency  needs  to  be  interpreted.  We 
may  as  well  admit  at  the  start  that  the 
efficiency  ideal  is  not  entirely  in  good 


8      HIGHER  EDUCATION  AND 

repute  at  this  moment.1  If  I  may  import 
an  expression  from  England,  we  have 
been  somewhat  "fed  up  "  with  efficiency 
during  the  recent  past  and  the  ration  has 
been  rather  too  much  for  our  digestion. 
Away  back  in  the  eighties,  before  the 
dominance  of  business  in  American  so- 
ciety had  been  questioned,  efficiency,  as 
the  term  was  then  understood,  had  a 
place  among  the  elect;  it  was  the  inti- 
mate associate  of  business  success.  Then 
came  the  muck-raker,  and  with  him  came 
also  anti-trust  cases  and  insurance  inves- 
tigations. We  turned  our  attention  to 

1  At  the  time  this  was  written,  in  the  spring  of  1916, 
it  will  be  recalled,  the  German  war  machine  for  nearly 
two  years  had  been  demonstrating  its  efficiency;  the  Allies 
had  not  yet  matched  it,  and  we  did  not  like  the  work  that 
efficiency  was  doing. 


BUSINESS  STANDARDS          9 

labor  outbreaks,  to  graft  prosecutions,  and 
to  land  steals.  We  talked  about  "male- 
factors of  great  wealth."  We  even  be- 
came interested  in  Schedule  K.  And  so, 
during  the  first  decade  of  the  new  cen- 
tury a  whole  train  of  revelations,  inci- 
dents, and  phrases  tempered  our  regard 
for  business  and  brought  many  business 
practices  under  the  ban  of  law  and  hostile 
sentiment.  Efficiency  was  in  bad  com- 
pany and  suffered  in  reputation. 

But  efficiency  was  able  to  prove  an 
alibi ;  we  were  told  that  the  thing  which 
posed  as  efficiency  was  not  efficiency,  but 
special  privilege,  and  we  were  again  per- 
suaded of  the  great  service  a  regenerate 
and  socialized  efficiency  could  render. 
Just  at  this  point  came  the  outbreak  in 


io    HIGHER  EDUCATION   AND 

Europe;  efficiency  was  again  caught  in 
bad  company,  and  we  began  to  hear  such 
phrases  as  the  "moral  breakdown  of 
efficiency,"  "efficiency,  a  false  ideal," 
and  others  of  similar  import.  In  an  arti- 
cle bearing  the  title, "  Moral  Breakdown 
of  Efficiency,"  published  in  the  "  Cen- 
tury "  for  June,  1 9 1 5,  it  was  maintained 
that  pursuit  of  efficiency  had  led  and 
was  still  leading  civilization  on  a  down- 
ward path. 

In  addition  to  the  reputation  of  keep- 
ing bad  company,  efficiency  has  to  bear 
the  odium  of  many  foolish  and  inefficient 
deeds  performed  by  its  self-appointed 
prophets.  The  quest  for  efficiency  has 
called  forth  in  business  a  new  functionary 
known  as  the  "efficiency  expert."  Many 


BUSINESS  STANDARDS        n 

of  these  men  have  done  a  vast  amount 
of  valuable  work,  but  many  others  have 
not.  While  the  real  expert  has  been 
raising  the  level  of  business  organiza- 
tion, the  others  have  been  piling  up  a 
large  wastage  of  poor  work  and  lost 
confidence. 

But  these  are  side  issues.  The  main 
fact  stands  out  above  them.  We  have 
been  steadily  adding  to  the  burdens  on 
industrial  and  commercial  equipment; 
even  more  have  we  increased  the  stresses 
and  the  strains  on  human  life.  A  devas- 
tating war  is  now  suddenly  taking  up  the 
slack,  and  the  slow  and  painful  task  of 
making  the  world  efficient  must  be  has- 
tened in  order  that  society  may  bear  the 
load.  In  these  circumstances  we  need  not 


12     HIGHER  EDUCATION   AND 

apologize  for  making  efficiency  the  main 
support  of  business  standards.  Nor  need 
we  assume,  as  does  the  author  just  cited, 
that  the  efficiency  ideal  in  any  way  con- 
flicts with  the  ideal  of  moral  responsi- 
bility and  service. 

Of  course,  if  we  reflect,  the  abstract 
and  impersonal  thing  which  engineers 
define  as  the  ratio  between  energy  ex- 
pended and  result  obtained  has  no  moral 
quality  in  itself.  Whatever  of  morality 
or  lack  of  morality  the  word  "  efficiency  " 
calls  forth  is  given  to  it  by  the  manner  in 
which  the  terms  of  the  ratio  are  defined. 
It  is  for  society  to  make  the  definitions. 
Society  may  determine  the  forms  and 
the  limitations  under  which  it  will  have 
business  energy  expended,  and  it  may 


BUSINESS  STANDARDS        13 

decide  what  are  the  social  ends  toward 
which  it  will  have  business  effort  con- 
tribute. Guided  by  wise  social  policy, 
efficiency  and  service  go  hand  in  hand. 
Since  business  is  subject  to  control 
by  society,  it  follows  that  the  efficiency 
factors  in  a  particular  business,  in  a  whole 
industry,  or  in  business  generally,  must 
adjust  themselves  to  the  decisions  that 
society  has  made,  and  they  must  also  take 
account  of  decisions  that  it  may  make 
in  the  future.  And  these  decisions  are 
not  all  recorded  in  the  law  or  even  in 
the  vague  thing  we  call  public  opinion. 
Laws  and  opinions  of  particular  groups, 
group  morality,  individual  morality,  even 
inertia,  and  a  long  list  of  more  subtle 
and  often  capricious  reactions  are  chan- 


14    HIGHER  EDUCATION   AND 

nels  through  which  social  purpose  finds 
expression. 

It  is  worth  our  while  to  consider  how 
these  reactions  may  affect  practical  ad- 
ministration. No  reflection  is  needed  to 
see  that  in  proportion  as  business  men  fail 
to  take  account  of  forces  outside  the  busi- 
ness, in  that  proportion  they  are  likely  to 
miscalculate  the  results  of  business  poli- 
cies. Striking  examples  of  such  miscal- 
culation are  found  in  the  experience  of 
Mr.  George  M.  Pullman  back  in  the 
nineties,  and  of  Mr.  Patterson,  of  the 
National  Cash  Register  Company,  a  dec- 
ade later.  Each  of  these  men,  with 
apparent  good  faith,  undertook  to  sur- 
round his  laborers  with  conditions  of 
physical,  mental,  and  moral  uplift,  and 


BUSINESS  STANDARDS        15 

each  undertook  to  do  it  as  an  act  of  pa- 
ternal bounty.  Each  of  them,  as  far  as 
we  can  judge,  expected  appreciation, 
gratitude,  and  increased  efficiency.  But 
they  failed  to  take  account  of  the  group 
consciousness  of  their  laborers;  they 
did  not  know  what  the  laborers  were 
thinking ;  and  because  the  laborers  were 
thinking  something  different  from  what 
the  employers  thought,  policies  intended 
to  arouse  gratitude  aroused  instead  re- 
sentment and  a  strike. 

But  there  are  many  things  besides 
too  much  paternalism  that  may  result  in 
a  strike.  Another  concern  of  interna- 
tional dimensions  and  one  whose  officers, 
I  can  vouch,  are  men  of  high  character 
and  public  spirit,  also  found  itself  con- 


1 6     HIGHER   EDUCATION  AND 

fronted  with  a  strike  in  1910.  This  was 
a  highly  organized  business.  For  years 
its  sales  department  had  tried  to  seek  out 
the  highest  grade  of  talent,  and  the  re- 
sult was  a  selling  and  distributing  organ- 
ization that  was  the  model  and  the  envy 
of  competitors.  But  questions  of  employ- 
ment seem  to  have  gone  by  default,  the 
general  policy  being  confined  to  a  sincere 
but  vague  good-will  toward  employees 
and  acceptance  of  things  as  they  were. 
The  issues  of  the  strike  were  issues 
with  which  we  are  all  familiar.  On  the 
workers'  side,  grievances  and  no  worka- 
ble machinery  for  redress;  result:  organ- 
ization, concerted  group  action,  force. 
On  the  other  side,  there  was  a  personal 
readiness  to  hear  grievances,  coupled 


BUSINESS  STANDARDS         17 

with  insistence  on  the  ancient  right  of 
the  employer  to  conduct  his  own  busi- 
ness in  his  own  way,  without  interference 
from  employees  or  the  public. 

After  weeks  of  deadlock  the  strain  of 
a  distressing  situation,  losses  from  the  in- 
terruption of  business,  regard  for  public 
opinion  and  the  opinion  of  friends,  com- 
bined with  their  own  desire  to  do  the 
right  thing,  induced  the  employers, 
probably  against  their  best  judgment,  to 
recede  from  their  position.  An  agree- 
ment was  made  providing  for  increased 
wages,  standardization  of  piece-work,  a 
preferential  shop,  and  appointment  by 
the  firm  of  a  person  to  hear  grievances 
and  to  cooperate  with  a  representative 
of  the  union  in  securing  redress. 


1 8     HIGHER  EDUCATION   AND 

The  union  in  this  case  was  fortunate 
in  being  represented  by  a  high-minded 
man  who  was  a  real  statesman.  The  firm 
selected  a  trained  economist  as  labor  ex- 
pert, and  he  soon  had  an  employment 
department  in  operation.  Together  these 
men  and  their  colleagues  have  kept  peace 
in  the  concern  and  have  developed  and 
expanded  the  machinery  for  settling  dis- 
putes into  a  model  of  industrial-relations 
organization. 

Some  four  years  after  the  strike  the 
business  head  of  the  firm  testified  in  a 
public  hearing  that  he  should  scarcely 
know  how  to  conduct  his  business  with- 
out the  organization  which  now  obtains 
for  dealing  collectively  with  labor.  He 
also  in  the  same  hearing  expressed  the 


BUSINESS  STANDARDS        19 

view  that  a  large  employer  is  a  trustee 
of  the  public,  responsible  for  the  meas- 
ure of  public  welfare  in  which  his  busi- 
ness results;  and  this  man,  remember,  is 
not  a  reformer  or  even  a  radical,  but  just 
a  successful  business  man. 

In  this  bit  of  labor  history  there  were, 
no  doubt,  many  fortunate  but  uncon- 
trollable factors  which,  otherwise  com- 
bined, would  have  brought  a  less  happy 
result.  But  two  things  stand  out :  first,  the 
laborers  listened  to  wise  counsel  —  they 
were  well  led;  and  second,  the  employ- 
ers, when  they  consented  to  make  an 
agreement,  gave  the  plan  adopted  their 
genuine  support.  Combining  good  citi- 
zenship with  business  sense  they  were 
able  to  understand  the  new  social  influ- 


20    HIGHER  EDUCATION  AND 

ences  that  make  the  formulas  of  1880  a 
poor  gauge  of  efficiency  factors  in  1910. 
They  are  now  enjoying  the  benefits  of 
their  willingness  to  learn. 

The  effect  of  social  forces  is  seen  un- 
der different  circumstances  and  from  an 
entirely  different  angle  in  the  present 
halting  policy  of  American  railroads.1 
Here,  in  addition  to  other  social  ele- 
ments in  the  question,  is  the  fact  of 
definite  government  control.  This  cir- 
cumstance has  accustomed  railway  man- 
agers to  look  at  both  the  internal  and 
the  public  factors  in  their  success.  A 
number  of  years  ago,  before  Mr.  Justice 
Brandeis  became  a  member  of  the  Su- 

1  Referring  to  the  situation  early  in  1916  when  this  sen- 
tence was  written. 


BUSINESS  STANDARDS        21 

preme  Court,  he  pointed  out,  as  many 
others  have  since  done,  that  the  railroads 
were  looking  too  much  to  the  govern- 
ment factor,  and  too  little  to  the  econ- 
omy and  effectiveness  of  their  own  in- 
ternal administration.  Even  though  we 
concede  this  point,  it  is  still  clear  that 
the  highest  efficiency  of  our  railroads 
must  wait  upon  a  clarification  of  policy 
with  respect  to  the  great  social  fact  af- 
fecting railway  operation  —  the  fact  of 
government  control.  We  may  not  ap- 
prove the  precise  manner  in  which  the 
railroads  respond  to  this  fact,  but  obvi- 
ously they  cannot  be  efficient  and  ig- 
nore it. 

Examples,  ranging  all  the  way  from 
accepted  and  enforceable  legal  restric- 


22     HIGHER  EDUCATION   AND 

tions  to  the  interplay  of  the  most  subtle 
group  sentiments,  could  be  multiplied 
at  will  to  bring  out  the  presence  of 
the  social  factor  in  efficiency  standards. 
Were  it  not  that  internal  business  poli- 
cies, on  the  one  hand,  and  public  pol- 
icy toward  business,  on  the  other,  are  so 
frequently  vitiated  by  failure  to  reckon 
with  the  probable  reactions  which  a  par- 
ticular measure  will  call  forth,  I  should 
not  retard  the  discussion  to  emphasize 
a  point  so  obvious.  But  though  the  pres- 
ence of  social  factors  is  obvious,  how 
to  measure  them  is  not  obvious.  Gen- 
eral principles  that  bear  on  a  specific 
case  are  hard  to  locate  and  difficult  to 
apply.  Even  the  broad  lines  of  social 
and  business  policy  are  not  always  clear, 


BUSINESS  STANDARDS        23 

and  the  probable  trend  of  future  policy 
is  still  less  clear. 

Just  what  are  the  principles  that  are 
being  worked  out  in  order  to  deter- 
mine the  forms  and  the  limitations  un- 
der which  business  energy  shall  be  ex- 
pended, and  how  do  they  differ  from 
those  followed  a  generation  ago?  Take 
the  other  side  of  the  efficiency  ratio: 
toward  what  results  are  we  trying  to  have 
business  energy  directed?  Again,  what 
are  the  instruments  with  which  society  is 
enforcing  its  purpose  ?  How  effective  are 
they,  how  effective  are  they  likely  to  be- 
come ?  Finally,  what  bearing  will  this 
social  effectiveness  or  lack  of  effectiveness 
have  on  standards  of  business  efficiency 
for  the  generation  about  to  begin  its  work  ? 


24    HIGHER  EDUCATION  AND 

Even  though  we  cannot  answer  these 
questions  to-day,  we  have,  to-day,  the 
task  of  educating  the  generation  that 
must  answer  them.  More  than  this,  the 
education  we  provide  for  the  generation 
about  to  begin  its  work  will  determine, 
in  no  small  measure,  the  kind  of  an- 
swers the  future  will  give.  It  is,  there- 
fore, of  great  importance  that  in  our 
ideals  and  our  policies  for  educating  fu- 
ture business  men  we  should  try  to  an- 
ticipate the  social  environment  in  which 
these  men  will  do  their  work. 

We  are  in  the  habit  of  speaking  of 
the  present  as  a  time  of  transition  — 
the  end  of  the  old  and  the  beginning 
of  the  new.  In  a  very  real  sense  every 
period  is  a  period  of  transition.  Society 


BUSINESS   STANDARDS        25 

is  always  in  motion,  but  that  motion  at 
times  is  accelerated  and  at  other  times 
retarded.  Clearly  we  are  living  now 
in  a  period  of  acceleration  —  a  period 
which  must  be  interpreted  not  so  much 
in  terms  of  where  we  are,  as  of  whence 
we  came  and  whither  we  are  going. 
This  means  that  we  cannot  hope  to  pre- 
pare an  educational  chart  for  the  future 
without  understanding  the  past. 

In  our  study  of  business  we  are  al- 
ways emphasizing  the  "long-time  point 
of  view,"  and  we  fall  back  upon  this 
convenient  phrase  to  harmonize  many 
discrepancies  between  our  so-called  sci- 
entific principles  and  present  facts.  On 
the  whole,  we  are  well  justified  in  as- 
suming these  long-time  harmonies,  but 


26    HIGHER  EDUCATION  AND 

it  will  not  do  to  overlook  the  fact  that 
many  important  and  legitimate  enter- 
prises have  to  justify  themselves  from  a 
short- time  viewpoint.  Of  more  impor- 
tance still  is  the  fact  that  in  this  coun- 
try enterprises  of  the  latter  sort  have 
predominated  in  the  past.  This  circum- 
stance has  a  very  marked  bearing  on  the 
nature  of  our  task,  when  we  try  to  ap- 
proach business  from  the  standpoint  of 
education. 

There  are  strong  historical  and  tem- 
peramental reasons  why  nineteenth-cen- 
tury Americans  were  inclined  to  take  a 
short-time  view  of  business  situations. 
Our  fathers  were  pioneers,  and  the  pio- 
neer has  neither  the  time,  the  capital, 
the  information,  the  social  insight,  nor 


BUSINESS  STANDARDS        27 

the  need  to  build  policies  for  a  distant 
future.  The  pioneer  must  support  him- 
self from  the  land ;  he  must  get  quick 
results,  and  he  must  get  them  with  the 
material  at  hand. 

Every  one  of  our  great  industries  — 
steel,  oil,  textiles,  packing,  milling,  and 
the  rest  —  has  its  early  story  colored 
with  pioneer  romance.  The  same  ro- 
mantic atmosphere  gave  a  setting  of 
lights  and  shadows  to  merchandising 
and  finance  and  most  of  all  to  transpor- 
tation. Whether  we  view  these  nine- 
teenth-century activities  from  the  stand- 
point of  private  business  or  of  public 
policy,  they  bear  the  same  testimony  to 
the  pioneer  attitude  of  mind. 

Considering  our  business  life  in  its 


28     HIGHER  EDUCATION  AND 

national  aspects,  our  two  greatest  enter- 
prises in  the  nineteenth  century  were 
the  settlement  of  the  continent  and  the 
building-up  of  a  national  industry.  In 
both  these  enterprises  we  gave  the  pio- 
neer spirit  wide  range.  With  respect  to 
the  latter,  industrial  policy  before  1 900 
was  summed  up  in  three  items :  protec- 
tive tariff,  free  immigration,  and  essen- 
tial immunity  from  legal  restraints. 
This  is  not  the  place  to  justify  or  con- 
demn a  policy  of  laissez-faire  t  or  to 
strike  a  balance  of  truth  and  error  in 
the  intricate  arguments  for  protection 
and  free  trade ;  nor  need  we  here  trace 
the  industrial  or  social  results  of  immi- 
gration. We  need  only  point  out  that 
the  policy  in  general  outline  illustrates 


BUSINESS  STANDARDS        29 

the  attitude  of  the  pioneer.  The  thing 
desired  was  obvious ;  obvious  instru- 
ments were  at  hand  —  immediate  means 
used  for  immediate  ends.  From  his 
viewpoint,  the  question  of  best  means 
or  of  ultimate  ends  did  not  need  to  be 
considered. 

In  building  our  railways  and  settling 
our  lands  the  pioneer  spirit  operated 
still  more  directly,  and  in  this  connec- 
tion it  has  produced  at  the  same  time 
its  best  and  its  worst  results.  The  prob- 
lem of  transportation  and  settlement 
was  not  hard  to  analyze ;  its  solution 
seemed  to  present  no  occasion  for  diffi- 
cult scientific  study  or  for  a  long  look 
into  the  future.  The  nation  had  lands,  it 
wanted  settlers,  it  wanted  railroads.  If 


30    HIGHER  EDUCATION  AND 

half  the  land  in  a  given  strip  of  territory 
were  offered  at  a  price  which  would  at- 
tract settlers,  the  settlers  would  insure 
business  for  a  railroad.  The  other  half 
of  the  land,  turned  over  to  a  railroad  com- 
pany, would  give  a  basis  for  raising  capi- 
tal to  build  the  line.  With  a  railroad  in 
operation,  land  would  increase  in  value, 
the  railroad  could  sell  to  settlers  at  an 
enhanced  price  and  with  one  stroke  re- 
cover the  cost  of  building  and  add  new 
settlers  to  furnish  more  business. 

In  its  theory  and  its  broad  outline  the 
land-grant  policy  is  not  hard  to  defend. 
The  difficulties  came  with  execution. 
We  know  that  in  actual  operation  the 
policy  meant  reckless  speculation  and 
dishonest  finance.  We  know  that  no 


BUSINESS  STANDARDS        31 

distinction  in  favor  of  the  public  was 
made  between  ordinary  farm  lands,  for- 
est lands,  mineral  lands,  and  power  sites. 
We  know  that  the  beneficiaries  of  land 
grants  were  permitted  to  exchange  ordi- 
nary lands  for  lands  of  exceptional  value 
without  any  adequate  quid  pro  quo;  and 
we  know  that  there  were  no  adequate 
safeguards  against  theft. 

Wholesale  alienation  of  public  prop- 
erty was  intended  to  secure  railroads  and 
settlers,  but  the  government  did  not  see 
to  it  that  the  result  was  actually  achieved. 
Speculation  impeded  the  railways  in  do- 
ing their  part  of  the  task,  while  indi- 
viduals enriched  themselves  from  the 
proceeds  of  grants  or  withheld  the  grants 
from  settlement  to  become  the  basis  of 


32     HIGHER  EDUCATION  AND 

future  speculative  enterprises.  All  this 
seems  to  show  that  in  execution  at  least 
our  policy  from  a  national  standpoint 
was  short-sighted.  Careful  analysis  and 
a  more  painstaking  effort  to  look  ahead 
might  have  brought  more  happy  results. 
And  how  about  the  railroads  from  the 
standpoint  of  private  enterprise  ?  A  rail- 
way financier  once  described  a  western 
railway  as  "  a  right  of  way  and  a  streak 
of  rust."  The  phrase  was  applicable  to 
many  railways.  Deterioration  and  lack 
of  repairs  were,  of  course,  responsible 
for  part  of  the  condition  it  suggests,  but 
much  of  the  fault  went  back  to  orig- 
inal construction.  It  was  the  wonder 
and  the  reproach  of  European  engineers 
that  their  so-called  reputable  American 


BUSINESS   STANDARDS        33 

colleagues  would  risk  professional  stand- 
ing on  such  temporary  and  flimsy  struc- 
tures as  the  original  American  lines. 
Poor  road  bed ;  poor  construction ;  tem- 
porary wooden  trestles  across  danger- 
ous spans — everything  the  opposite  of 
what  sound  engineering  science  seemed 
to  demand.  Why  did  not  the  owners  of 
the  roads  exercise  business  foresight  to 
provide  for  reasonably  solid  construc- 
tion ? 

What  seems  like  an  obvious  and  easy 
answer  to  all  these  questions  is  that  both 
the  Government  and  the  road  were  con- 
trolled in  many  cases,  as  the  people  of 
California  well  know,  by  the  same  men, 
and  these  men  were  privately  interested. 
As  public  servants  or  as  officers  of  cor- 


34    HIGHER  EDUCATION  AND 

porations  they  were  supposed  to  be  pro- 
moting settlement  and  transportation ; 
as  individuals  they  were  promoting  their 
own  fortunes.  This  result  was  secured 
by  the  appropriation  of  public  lands  and 
the  conversion  of  investments  which  the 
public  lands  supported.  That  this  sort 
of  thing  occurred  on  a  large  scale  and 
that  it  involved  the  violation  of  both 
public  and  private  trusts  is  fairly  clear. 
Public  sentiment  has  judged  and  con- 
demned the  men  who  in  their  own  in- 
terests thus  perverted  national  policy; 
and  we  approve  the  verdict.  But  it  is 
not  so  easy  to  condemn  the  policy  itself 
or  to  indict  the  generation  that  adopted 
it.  Looking  at  the  matter  from  the 
standpoint  of  the  nation,  it  was  precisely 


BUSINESS  STANDARDS        35 

the  inefficiency  and  the  corruption  in 
government  which  augmented  the  the- 
oretical distrust  of  government  and  made 
it  unthinkable  to  the  people  of  the  sev- 
enties, that  the  Government  should  build 
and  operate  railways  directly.  The  land- 
grant  policy  entailed  corruption  and 
waste,  of  course ;  but  what  mattered  a 
few  million  acres  of  land !  No  one  had 
heard  of  a  conservation  problem  at  the 
close  of  the  Civil  War.  Resources  were 
limitless ;  without  enterprise,  without 
labor  and  capital,  without  transportation 
they  had  no  value,  they  were  free  goods. 
The  great  public  task  of  the  nineteenth 
century  was  to  settle  the  continent  and 
make  these  resources  available  for  man- 
kind. This  task  it  performed  with  nine- 


36    HIGHER  EDUCATION  AND 

teenth-century  methods.  From  our 
standpoint  they  may  have  been  wasteful 
methods,  but  they  did  get  results.  In  its 
historical  setting,  the  viewpoint  from 
which  the  task  of  settlement  was  ap- 
proached was  not  so  far  wrong. 

When  we  examine  the  counts  against 
the  railroads  as  private  enterprises,  we 
find  that  the  poor  construction,  which 
from  our  point  of  vantage  looks  like 
dangerous,  wasteful,  hand-to-mouth  pol- 
icy, is  only  in  part  explained  by  the  fact 
of  reckless  and  dishonest  finance.  I  am 
advised  by  an  eminent  and  discriminat- 
ing observer  that  the  distinguished  Ital- 
ian engineer  to  whom  Argentina  en- 
trusted the  building  of  its  railroad  to 
Patagonia,  produced  a  structure  which 


BUSINESS  STANDARDS        37 

in  engineering  excellence  is  the  equal 
of  any  in  the  United  States  to-day.  But 
the  funds  are  exhausted  and  the  Pata- 
gonia railroad  is  halted  one  hundred  and 
fifty  miles  short  of  its  goal ;  there  are  no 
earnings  to  maintain  the  investment. 

The  reaction  of  high  interest  rates  on 
the  practical  sense  of  American  capital- 
ists and  engineers  has  made  operation  at 
the  earliest  possible  moment  and  with 
the  smallest  possible  investment  of  cap- 
ital the  very  essence  of  American  rail- 
way building  in  new  territory.  Actual 
earnings  are  expected  to  furnish  capital, 
or  a  basis  for  credit,  with  which  to  make 
good  early  engineering  defects.  All  this, 
of  course,  is  but  another  way  of  saying 
that  the  criterion  of  engineering  effi- 


3  8     HIGHER  EDUCATION  AND 

ciency  is  not  "  perfection,"  but  "  good 
enough."  This  distinction  has  placed  a 
large  measure  of  genuine  efficiency  to 
the  credit  of  American  engineers,  and 
it  explains  why  Americans  have  done 
many  things  that  others  were  unwill- 
ing to  undertake.  It  is  a  great  thing  to 
build  a  fine  railroad  in  Patagonia,  but  I 
am  sure  we  all  rejoice  that  the  first  Pa- 
cific railroad  did  not  have  its  terminus 
in  the  Nevada  sagebrush.  The  standard 
of  technical  perfection  set  by  the  Italian 
engineer  did  not  fit  the  facts.  It  is  not 
the  failure  to  attain  his  standard  but  the 
failure  to  measure  up  to  a  well-consid- 
ered standard  of  "good  enough"  that 
stands  as  an  indictment  against  Ameri- 
can railway  enterprise. 


BUSINESS  STANDARDS        39 

Viewed  in  historical  perspective  the 
business  environment  of  the  pioneer  ap- 
pears to  have  been  dominated  by  two 
outstanding  facts :  one,  seemingly  inex- 
haustible resources ;  the  other,  a  set  of 
political  and  economic  doctrines  which 
told  him  that  these  resources  must  be 
developed  by  individual  initiative  and 
not  by  the  State.  The  faster  the  re- 
sources were  developed  the  more  rap- 
idly the  nation  became  economically 
independent  and  economically  great, 
and  since  they  could  not  be  developed 
by  the  State  it  is  not  strange  that  pri- 
vate initiative  was  stimulated  by  offer- 
ing men  great  and  immediate  rewards. 
These  rewards  have  encouraged  individ- 
uals and  associations  of  individuals  to 


40     HIGHER  EDUCATION   AND 

aspire  to  a  quick  achievement  of  great 
economic  power,  and  their  aspirations 
have  been  realized.  Such  achievements 
have  been  a  dominating  feature  of  our 
business  life,  and  we  have  regarded  them 
as  an  index  of  national  greatness. 

Abundance  of  resources,  if  it  did  not 
make  this  the  best  way,  at  least  made 
it  an  obvious  way,  for  the  nineteenth 
century  to  solve  its  business  problems. 
From  our  vantage  point  we  can  see  that 
serious  mistakes  were  made.  When  we 
set  the  foresight  of  our  fathers  against 
our  own  informed  and  chastened  hind- 
sight their  methods  appear  clumsy  and 
amateurish.  But  in  the  main  they  did 
solve  their  problems :  they  gave  us  a  set- 
tled continent ;  they  gave  us  transporta- 


BUSINESS  STANDARDS        41 

tion  and  diversified  industry.  We  now 
have  our  garden  and  the  tools  with  which 
to  work  it.  If  the  pioneer  allowed  the 
children  to  pick  flowers  and  in  some 
cases  to  run  away  with  the  plants  and  the 
soil,  he  did  not  fail  to  develop  the  estate. 
Our  inheritance  from  the  pioneer  is 
not  only  material  but  psychological. 
The  pioneer  attitude  of  mind  has  made 
a  real  contribution  to  our  business  stand- 
ards. The  very  magnitude  of  our  en- 
terprises, the  fact  that  we  have  had  to 
develop  our  methods  as  we  went,  our 
success  in  approaching  problems  that 
way,  have  given  us  a  confidence  in  our- 
selves and  a  readiness  to  undertake"  big 
things  without  counting  the  cost.  This 
readiness  is  a  large,  perhaps  a  dominant, 


42     HIGHER  EDUCATION  AND 

factor  in  our  contribution  to  world 
progress.  It  is  not  an  accident  that  the 
greatest  problems  of  mountain  railway 
building  have'  been  met  and  solved  by 
American  engineers,  or  that  they  have 
carried  a  great  railroad  under  two  rivers 
to  the  heart  of  our  greatest  city.  These 
in  a  private  way,  and  the  Panama  Ca- 
nal in  a  public  way,  are  typical  of 
American  engineering  enterprise. 

As  with  engineering,  so  with  general 
business.  Our  pioneer  managers  did  not 
lack  imagination ;  they  were  not  afraid 
to  undertake ;  they  were  not  constrained 
by  worry  lest  they  make  mistakes.  They 
made  many  mistakes.  Some  were  cor- 
rected, others  ignored,  but  many  more 
were  concealed  by  an  abundant  success. 


BUSINESS  STANDARDS        43 

The  pioneer  could  afford  to  do  the  next 
thing  and  let  the  distant  thing  take  care 
of  itself,  and  in  large  measure  he  es- 
caped the  penalties  which  normally  fol- 
low a  failure  to  look  ahead. 

Substantial  forces  have  tended  to  keep 
the  pioneer  spirit  alive.  If  some  re- 
sources have  been  depleted,  other  re- 
sources have  been  found  to  take  their 
place.  Scientific  discovery,  invention, 
and  the  development  of  technique  have 
placed  new  forces  at  our  command. 
Products  have  been  multiplied,  but  the 
demand  for  products  has  multiplied 
faster.  We  have  been  able  to  continue 
offering  men  great  and  immediate  re- 
wards for  the  development  of  new 
enterprises.  As  labor  was  needed,  our 


44    HIGHER   EDUCATION   AND 

neighbors  have  continued  to  supply  it. 
The  result  is  that  our  business  has  con- 
tinued to  go  ahead  without  being  too 
much  concerned  about  the  direction  in 
which  it  was  going. 

Business  has  eagerly  appropiated  the 
results  of  science  without  itself  becoming 
scientific.  The  difficult  way  of  science 
makes  slow  progress  against  the  dazzling 
rewards  of  unbridled  daring.  So  many 
strong  but  untrained  men  have  been  en- 
riched by  seizing  upon  the  immediate 
and  obvious  circumstance  —  there  has 
been  so  little  necessity  for  sparing  ma- 
terials or  men  and  so  little  penalty  for 
waste  —  that  we  have  developed  a  na- 
tional impatience  with  the  slow  and 
tedious  process  of  finding  out. 


BUSINESS  STANDARDS        45 

Along  with  our  technical  and  business 
enterprise,  with  the  courage  and  imagi- 
nation of  which  we  are  justly  proud,  a 
too  easy  success  has  given  us  a  tendency 
to  drop  into  a  comfortable  and  optimistic 
frame  of  mind.  Imagination,  intuition, 
power  to  picture  the  future  interplay  of 
forces,  courage  and  capacity  for  quick  ac- 
tion—  all  these  qualities  are  as  essential 
to-day  as  they  ever  were  to  business  suc- 
cess. The  pioneer  environment  reacting 
on  our  native  temperament  has  given  us 
these  qualities  in  full  measure,  but  it 
has  also  given  us  a  habit  of  doing  things 
in  a  hit-or-miss  fashion.  Our  very  im- 
agination and  courage  applied  to  wrong 
circumstances  and  in  perverted  form  have 
often  borne  the  fruit  of  national  defects. 


46    HIGHER  EDUCATION  AND 

There  is  a  strong  inclination  to  assume 
that  the  old  approach  to  problems  will 
bring  the  same  results  that  it  did  in  the 
past,  and  to  forget  that  we  are  living  in 
a  new  world.  The  problems  confront- 
ing the  pioneer  were  not  the  problems 
we  face  to-day.  It  requires  great  ability 
to  draft  a  prospectus;  in  many  of  our 
greatest  enterprises  drafting  the  pros- 
pectus has  been  the  crucial  task.  But  a 
prospectus  is  not  a  going  concern.  There 
is  a  vast  difference  between  promotion 
and  administration.  In  the  promotional 
stage  of  our  business  life  we  were  solving 
problems  made  up  of  unknown  quanti- 
ties, problems  for  which  the  only  angle 
of  approach  was  found  in  the  formula 
x+y  =  z.  We  still  have  and  shall  always 


BUSINESS  STANDARDS        47 

have  problems  of  the  x-\-y  =  z  type,  but 
if  we  apply  that  formula  to  a  problem  in 
which  2  +  2  =  4  we  are  not  likely  to  get 
the  best  results. 

Business  may  not  yet  be  a  science,  but 
it  is  rapidly  becoming  scientific.  Scien- 
tific inquiry  is  all  the  while  carrying  new 
factors  from  the  category  of  the  unknown 
to  that  of  the  known,  and  by  so  doing  it 
is  setting  a  new  standard  of  business  effi- 
ciency. The  more  brilliant  qualities, 
like  courage  and  imagination,  must  be 
coupled  with  capacity  for  investigation 
and  analysis,  with  endless  patience  in 
seeking  out  the  twos  and  the  fours  and 
eliminating  them  from  the  equation. 
When  it  is  possible  by  scientific  research 
to  distinguish  a  right  way  and  a  wrong 


48     HIGHER  EDUCATION  AND 

way  to  do  a  task,  it  is  not  an  evidence 
of  courage  or  imagination  but  of  folly 
to  act  on  a  faulty  and  imperfect  reckon- 
ing with  the  facts. 

The  person  who  uses  scientific  method 
takes  account  of  all  his  known  forces; 
he  prepares  his  materials,  controls  his 
processes  and  isolates  his  factors  so  as  to 
reveal  the  bearing  of  every  step  in  the 
process  upon  an  ultimate  and  often  a  far 
distant  result.  In  other  words,  he  tries 
at  every  stage  to  build  upon  a  sure  foun- 
dation. His  trained  imagination  andjudg- 
ment  working  on  known  facts  set  the 
limit  on  what  he  may  expect  to  find,  and 
interpret  what  he  does  find,  all  along  the 
way. 

In  so  far   as  particular  business  en- 


BUSINESS   STANDARDS        49 

terprises  have  rested  on  engineering, 
chemistry,  biology,  and  other  sciences, 
a  scientific  method  of  approach  has  long 
had  large  use  in  business ;  but  the  scien- 
tist in  business  has  usually  been  a  salaried 
expert  —  a  man  apart  from  the  manage- 
ment—  and  it  has  been  his  results,  and 
not  necessarily  his  methods,  that  have 
influenced  business  practice.  We  are  now 
coming  to  understand  that  scientific 
method  is  the  only  sure  approach  to  all 
problems ;  it  is  a  thing  of  universal  ap- 
plication, and  far  from  being  confined 
to  the  technical  departments  of  busi- 
ness, where  the  technical  scientists  hold 
sway  in  their  particular  specialties,  it 
may  have  its  widest  application  in  work- 
ing out  the  problems  of  management. 


50    HIGHER  EDUCATION  AND 

The  way  in  which  a  man  trained  in 
scientific  method  may  determine  busi- 
ness practice  in  a  scientific  manner  finds 
illustration  in  a  multitude  of  practical 
business  problems,  ranging  all  the  way 
from  the  simplest  office  detail  to  the  most 
far-reaching  questions  of  policy.  To  cite 
an  example,  of  the  simpler  sort:  if  an 
item  in  an  order  sheet  is  identical  for 
eight  out  of  ten  orders  is  it  better  to 
have  a  clerk  typewrite  the  eight  repeti- 
tions along  with  the  two  deviations  or 
to  use  a  rubber  stamp  ?  Of  course,  there 
are  not  one  or  two,  but  many,  items  in 
an  order  sheet  and  the  repetitions  and 
deviations  are  not  the  same  for  all  items. 
In  practical  application,  the  rubber-stamp 
method  means  a  rack  of  rubber  stamps 


BUSINESS  STANDARDS        51 

placed  in  the  most  advantageous  posi- 
tion. It  requires  also  a  decision  as  to  the 
precise  percentage  of  repetitions  which 
makes  the  stamp  advantageous.  Then 
arises  the  further  question,  why  not  have 
the  most  numerous  repetitions  numbered 
and  keyed  and  thus  avoid  the  necessity 
of  transcribing  them  at  all  ? 

The  rule-of-thumb  approach  to  this 
kind  of  problem  would  proceed  from 
speculations  concerning  the  effect  of  in- 
terrupting the  process  to  use  the  stamp, 
the  result  of  such  interruptions  on  the 
accuracy  of  work,  difficulties  in  the 
way  of  necessary  physical  adjustments, 
and  many  other  questions  that  would 
occur  to  the  practical  manager. 

The  scientific   method  of  approach 


52     HIGHER  EDUCATION  AND 

would  first  inquire  whether  there  are  any 
principles  derived  from  previous  motion 
study  or  other  investigations,  that  apply 
to  the  case  in  hand.  In  accord  with 
such  principles  it  would  then  proceed, 
as  far  as  possible,  to  eliminate  neutral  or 
disturbing  third  factors  and  to  arrange 
a  test.  The  results  of  the  test  would 
lead,  either  to  a  continuance  of  the  old 
practice,  or  to  the  establishment  of  a 
new  practice  for  a  certain  period,  after 
which,  if  serious  difficulties  were  not 
revealed,  the  new  practice  would  be 
definitely  installed. 

It  should  be  emphasized  at  this  point, 
that  there  is  a  fundamental  difference  be- 
tween investigations  or  tests  which  con- 
template an  immediate  modification  of 


BUSINESS   STANDARDS         53 

practice  and  those  investigations  in  which 
research  —  that  is,  the  discovery  of  new 
truths  —  is  the  sole  object.  Tests  which 
are  carried  on  within  the  business  must 
never  lose  sight  of  the  fact  that  a  busi- 
ness is  a  going  concern  and  that  it  is 
impracticable  and  usually  undesirable  to 
transform  a  business  into  a  research  lab- 
oratory. Scientific  methods  in  business 
should  not  be  confused  with  the  larger 
problem  of  scientific  business  research. 
This  larger  task,  if  undertaken  by  the  in- 
dividual business  concern,  is  the  work  of 
a  separate  department.  For  business  gen- 
erally, it  will  have  to  be  conducted  either 
by  the  Government,  or  by  business-re- 
search endowments.  The  point  at  which, 
in  practical  business,  research  should  give 


54     HIGHER  EDUCATION  AND 

place  to  action  is  a  question  that  wise 
counsel  and  the  sound  sense  of  the  trained 
executive  must  determine. 

An  example  of  the  contrast  between  a 
scientific  and  a  rule-of-thumb  approach, 
as  applied  to  a  question  of  major  policy, 
is  found  in  discussions  of  the  relative 
advantages  of  a  catalogue  and  mail-order 
policy  over  against  a  policy  of  distribu- 
tion by  traveling  salesmen.  A  few  years 
ago  the  head  of  one  of  the  largest  whole- 
sale organizations  in  the  United  States, 
talking  with  an  intimate  friend,  expressed 
fear  that  his  house,  which  employed  sales- 
men, might  be  at  a  dangerous  disadvan- 
tage with  its  chief  competitor,  which  did 
an  exclusively  mail-order  business.  The 
friend  comforted  him  with  the  assurance 


BUSINESS  STANDARDS        55 

that  there  are  many  buyers  who  prefer 
to  be  visited  by  salesmen  and  to  have 
goods  displayed  before  them.  This  fact, 
he  held,  would  always  give  an  adequate 
basis  for  the  prosperity  of  a  house  that 
employed  the  salesman  method  of  dis- 
tribution. 

Neither  the  fear  nor  the  assurance 
here  expressed  reveals  a  scientific  atti- 
tude of  mind.  Careful  analysis  shows,  on 
the  one  hand,  that  the  mail-order  policy 
is  not  the  most  effective  means  of  culti- 
vating intensively  a  well  populated  ter- 
ritory. On  the  other  hand,  it  shows  that 
the  expense  of  sending  salesmen  to  dis- 
tant points  in  sparsely  populated  areas 
more  than  absorbs  the  profits  from  their 
sales.  Individual  concerns  have  arrived 


56     HIGHER  EDUCATION   AND 

at  these  conclusions  by  experiment  and 
accurate  cost-keeping  and  have  succeeded 
in  reaching  a  scientific  decision  as  to 
which  territories  should  be  cultivated 
by  salesmen  and  which  ones  should  be 
covered  exclusively  through  advertising 
and  the  distribution  of  catalogues  and 
other  literature. 

The  difficulty  that  business  men  find 
in  applying  scientific  method  consist- 
ently in  the  analysis  of  their  problems 
is  strikingly  revealed  in  the  labor  policy 
of  the  great  majority  of  industrial  con- 
cerns. While  many  men  of  scientific 
training  are  dealing  with  problems  of 
employment,  probably  no  concern  has 
undertaken  to  make  a  scientific  analysis 
to  determine  what  are  the  foundations 


BUSINESS   STANDARDS        57 

of  permanent  efficiency  of  the  labor  force 
which  they  employ.  This  is  not  sur- 
prising, when  we  remember  how  com- 
plicated is  the  problem  and  how  short 
the  time  during  which  we  have  been  em- 
phasizing the  human  relations  as  dis- 
tinguished from  the  material  or  mechan- 
istic aspect  of  business  organization. 

To  state  even  a  simple  problem  of 
management,  like  the  one  concerning 
the  order  sheet,  set  forth  above,  is  to 
reveal  some  of  the  difficulties  of  analy- 
sis which  characterize  all  subject-matter 
having  to  do  with  human  activity.  This 
means  that  we  should  not  expect  results 
too  quickly  nor  should  we  be  disap- 
pointed if  the  first  results  of  efforts  at 
scientific  analysis  are  not  absolutely  con- 


58     HIGHER  EDUCATION  AND 

elusive.  As  soon  as  we  recognize  that 
business  is  primarily  a  matter  of  human 
relations,  that  it  has  to  do  with  groups 
and  organizations  of  human  beings,  we 
see  that  scientific  analysis  of  it  cannot 
proceed  in  exactly  the  same  way  as  with 
units  of  inanimate  matter.  The  reaction 
of  human  relations  to  changed  influ- 
ences, frequently  cannot  be  predicted  un- 
til the  changes  occur.  Business,  in  other 
words,  is  a  social  science  and,  like  all 
social  sciences,  must  deal  primarily  with 
contingent  rather  than  exact  data ;  like- 
wise conclusions  drawn  from  scientific 
analysis  must  in  large  measure  be  con- 
tingent rather  than  exact. 

Although  we  cannot  always  isolate  our 
factors,  control  our  processes,  and  other- 


BUSINESS  STANDARDS        59 

wise  apply  scientific  method,  with  results 
as  conclusive  as  those  obtained  in  labo- 
ratories of  chemistry,  physics,  or  biology, 
we  need  not  therefore  reject  scientific 
method  in  favor  of  a  rule-of-thumb.  We 
should,  however,  be  suspicious  of  too 
sweeping  claims  based  on  any  but  the 
most  careful  and  painstaking  analysis  of 
facts  by  persons  who  are  thoroughly 
trained  in  the  kind  of  analysis  they 
undertake. 

While  a  scientific  approach  will  help 
in  solving  many  problems  of  business  de- 
tail, the  substitution  of  scientific  method 
for  a  rule-of-thumb  approach  will  real- 
ize its  object  most  completely  in  the  in- 
fluences exerted  upon  fundamental  long- 
time policy,  influences  which  cannot  bear 


6o    HIGHER  EDUCATION  AND 

fruit  in  a  day  or  a  year.  The  circum- 
stances of  our  history  have  retarded  the 
acceptance  of  a  long- time  scientific  view- 
point in  business,  but  forces  now  at 
work  are  making  powerfully  for  a  sci- 
entific approach  to  business  manage- 
ment. First  among  these  is  a  realization 
that  our  resources  are  measured  in  finite 
terms.  We  have  begun  to  take  account 
of  what  we  have,  and  we  are  able  in  a 
rough  way  to  figure  the  loss  from  what 
we  have  squandered.  The  situation  is  not 
desperate,  but  we  can  see  that  it  may 
become  so.  To  insure  against  possible 
disaster  in  the  future  we  need  to  exercise 
effective  economy  in  turning  resources 
into  finished  goods,  and  we  need  to  elimi- 
nate waste  in  the  distribution  and  the 


BUSINESS  STANDARDS        61 

consumption  of  these  goods.  In  private 
business  the  need  for  such  economy  is 
reflected  in  rising  prices  for  raw  mate- 
rials. In  its  public  aspect  we  have  labeled 
the  problem,  conservation. 

A  second  force  making  for  a  scientific 
approach  to  business  is  found  in  the  be- 
ginnings of  a  social  policy  to  which  I 
have  referred.  This  policy  is  showing 
itself  in  limitations  upon  the  way  in 
which  materials  and  men  may  be  utilized 
and  in  a  sharper  definition  of  the  busi- 
ness man's  obligations  to  employees,  to 
competitors  and  consumers.  As  long  as 
resources  are  to  be  had  for  the  asking, 
while  cheap  labor  can  be  imported  and 
utilized  without  restraint,  and  where  no 
questions  are  asked  in  marketing  the 


62    HIGHER  EDUCATION  AND 

product,  there  is  not  the  right  incentive 
to  do  things  in  a  scientific  way.  As  busi- 
ness becomes  more  and  more  the  subject 
of  legal  definition,  as  the  tendency  grows 
of  regarding  it  as  a  definite  service,  per- 
formed under  definite  limitations,  and  for 
definite  social  ends,  margins  will  be  nar- 
rowed and  it  will  become  increasingly 
necessary  to  do  things  in  the  right  way. 
The  scientific  approach  to  business 
has  made  great  progress  during  the  past 
decade.  Out  of  the  hostile  criticism  to 
which  so-called  big  business  has  been 
subjected  have  come  several  government 
investigations  and  court  records,  in  which 
policies  of  different  concerns  have  been 
explained,  criticized,  and  compared. 
Besides,  business  men  themselves  have 


BUSINESS  STANDARDS        63 

become  less  jealous  of  trade  secrets  and 
have  shown  an  increasing  inclination  to 
compare  results.  A  good  illustration  of 
this  tendency  is  seen  in  the  growth  of 
"  open  price  associations "  and  in  the 
spirit  in  which  credit  men,  sales  man- 
agers' associations,  and  other  business 
groups  exchange  information.  In  the 
same  spirit,  business  and  trade  journals 
have  given  a  large  exposition  of  individ- 
ual experience  and  increasing  attention 
to  questions  of  fundamental  importance. 
More  significant  still  has  been  the 
scientific  management  propaganda.  Mr. 
Brandeis's  dramatic  exposition  of  this 
movement  in  the  railway  rate  cases  in 
1911  at  once  made  it  a  matter  of  public 
interest.  Later  discussion  may  not  have 


64    HIGHER  EDUCATION   AND 

extended  acceptance  of  scientific  man- 
agement, but  it  has  not  caused  interest 
in  it  to  flag.  The  movement  has  become 
essentially  a  cult.  Its  prophet,  the  late 
Frederick  Taylor,  by  ignoring  trade- 
unionism  and  labor  psychology  in  the 
exposition  of  his  doctrines,  at  once 
drew  down  upon  them  the  hostility  of 
organized  labor ;  the  movement  was 
branded  as  another  speeding-up  device. 
More  serious  than  the  antagonism  has 
been  the  spirit  in  which  some  of  the 
scientific  management  enthusiasts  — 
not  all  —  have  met  it.  They  seem  to  as- 
sume that  their  science  is  absolute  and 
inexorable,  that  it  eliminates  disturbing 
factors  and  hence  needs  no  adjustment 
to  adapt  it  to  the  difficulties  met  in  its 


BUSINESS  STANDARDS        65 

application.  This  air  of  omniscient  dog- 
matism, together  with  the  disasters  of 
false  prophets,  has  somewhat  compro- 
mised the  movement  and  has  diminished 
its  direct  influence.  However,  business 
men  have  been  stirred  up.  They  have 
become  accustomed  to  using  the  words 
"  science  "  and  "  business  "  in  the  same 
sentence.  They  are  in  a  receptive  atti- 
tude for  ideas.  The  indirect  influence 
has  been  great. 

A  final,  and  probably  in  the  long-run 
the  most  permanent,  influence  making 
for  the  extension  of  scientific  method  in 
business  has  been  the  new  viewpoint 
from  which  universities  have  been  ap- 
proaching the  task  of  educating  men  for 
business.  Prior  to  1900,  university  edu- 


66    HIGHER  EDUCATION  AND 

cation  for  business  in  the  few  universi- 
ties that  attempted  anything  of  the 
sort  was  confined  to  such  branches  of 
applied  economics  as  money  and  bank- 
ing, transportation,  corporation  finance, 
commercial  geography,  with  accounting 
and  business  law  to  give  it  a  professional 
flavor.  There  were  also  general  courses 
labeled  commercial  organization  and 
industrial  organization,  but  these  were 
almost  entirely  descriptive  of  the  gen- 
eral business  fabric  of  the  country,  and 
had  but  the  most  remote  bearing  on  the 
internal  problems  of  organization  and 
management  which  an  individual  busi- 
ness man  has  to  face.  The  assumption 
was  that  a  man  who  was  looking  for- 
ward to  business  would  probably  do  well 


BUSINESS  STANDARDS        67 

to  secure  some  information  about  busi- 
ness, but  there  was  little  attempt  at  defi- 
nite professional  training  of  the  kind 
given  to  prospective  lawyers,  physicians, 
or  engineers. 

Within  the  past  few  years  universities 
have  begun  to  undertake  seriously  the 
development  of  professional  training  for 
business.  The  result  has  been  that 
through  organized  research  and  through 
investigations  by  individual  teachers  and 
students,  the  universities  are  gathering 
up  the  threads  of  different  tendencies 
toward  scientific  business  and  are  them- 
selves contributing  important  scientific 
results.  Out  of  all  this  there  is  emerging 
a  body  of  principles  and  of  tested  prac- 
tice which  constitutes  an  appropriate 


68     HIGHER  EDUCATION  AND 

subject-matter  for  a  professional  course 
of  study,  and  points  the  way  to  still 
further  research. 

One  of  the  earliest  results  of  an  ap- 
proach to  business  in  an  attitude  of  sci- 
entific research,  is  the  discovery  that 
there  are  certain  fundamental  principles 
which  are  alike  for  all  lines  of  business, 
however  diverse  the  subject-matter  to 
which  analysis  is  applied.  Substituting 
the  principle  of  likeness  for  diversity  as 
the  starting-point  of  business  analysis, 
has  far-reaching  consequences  not  only 
for  education  and  research  but  for  man- 
agement as  well.  First  among  these  con- 
sequences is  the  fact  that  search  for 
elements  of  likeness  leads  at  once  to 
replacing  the  trade  or  industry  with  the 


BUSINESS  STANDARDS        69 

function  as  the  significant  unit  both  of 
research  and  organization. 

If  we  start  our  study  of  business  by 
separating  manufacturing,  railroading, 
merchandising,  banking,  and  the  rest, 
with  a  large  number  of  more  or  less  logi- 
cal subdivisions  in  each  field,  and  then  try 
to  work  out  a  body  of  principles  appli- 
cable to  each  subdivision,  we  soon  run 
into  endless  combinations  and  lose  all 
sense  of  unity  in  business  as  a  whole.  As 
soon,  however,  as  we  approach  business 
from  the  standpoint  of  accounting,  sales 
management,  employment,  executive 
control,  and  when  we  find  that  lessons 
in  statistics,  advertising,  moving  mate- 
rials, or  executive  management,  learned 
in  connection  with  a  factory,  can  be 


70    HIGHER  EDUCATION  AND 

carried  over  with  but  slight  adaptation 
to  the  management  of  a  store,  we  at 
once  get  a  manageable  body  of  material 
on  which  to  work. 

Recognition  of  the  principle  of  like- 
ness and  of  its  corollary,  analysis  by 
function  rather  than  by  trade,  marks  per- 
haps the  greatest  single  step  yet  taken  in 
the  development  of  scientific  business. 
The  principle,  however,  has  its  dangers. 
Analysis  by  function  implies  functional 
specialization  in  research  and  a  similar 
tendency  in  business  practice.  Without 
specialization  there  can  be  no  adequate 
analysis  of  any  large  and  complex  body 
of  facts.  With  too  intense  specializa- 
tion there  is  always  danger  that  the  as- 
sembling and  digesting  of  facts,  and 


BUSINESS  STANDARDS        71 

especially  the  conclusions  drawn  from 
them,  will  reflect  some  peculiar  slant  of 
an  individual  or  of  a  particular  specialty. 
The  accountant  does  not  always  go 
after  the  same  facts  as  the  sales  mana- 
ger, and  even  with  the  same  facts  the 
two  are  likely  to  draw  quite  different 
conclusions  as  to  their  bearing  on  a  gen- 
eral policy.  Specialization,  too,  may  re- 
sult in  setting  an  intense  analysis  of  one 
group  of  facts  over  against  a  very  super- 
ficial view  of  other  facts  —  or  again,  an 
intense  analysis  of  the  same  facts  from 
one  viewpoint  with  failure  to  consider 
them  from  another,  and  perhaps  equally 
important,  viewpoint.  Unless  these  weak- 
nesses are  corrected,  the  business  will 
lack  balance  ;  the  work  of  departments 


72     HIGHER  EDUCATION  AND 

will  not  harmonize ;  there  will  be  no 
fundamental  policy ;  goods  sold  on  a 
quality  basis  will  be  manufactured  on  a 
price  basis  —  all  of  which  leads  to  dis- 
astrous results. 

Scientific  method  is  the  first  article  in 
the  creed  by  which  business  training 
must  be  guided.  The  growing  necessity 
for  critical  and  searching  analysis  of 
business  problems,  justifies  all  the  effort 
we  can  put  forth  to  develop  plans  for 
training  into  a  structure  of  which  scien- 
tific method  shall  be  the  corner-stone. 
But  analysis  is  not  all.  Following  analy- 
sis must  come  synthesis.  Somewhere  all 
the  facts  and  conclusions  must  be  as- 
sembled and  gathered  up  into  a  working 
plan.  It  is  this  task  of  leveling  up  rough 


BUSINESS  STANDARDS        73 

places  in  the  combined  work  of  depart- 
ment specialists,  that  puts  the  training 
and  insight  of  both  the  executive  and 
the  director  of  research  to  the  most  se- 
vere test.  It  is  a  mark  of  a  well-trained 
executive  that  in  performing  his  task  he 
instinctively  follows  principles  instead  of 
trusting  alone  to  momentary  intuitions, 
however  valuable  and  necessary  these 
may  be. 

And  here  it  is  that  the  second  article 
in  the  creed  of  business  training  appears. 
The  executive's  task  is  primarily  to  ad- 
just human  relations,  and  the  nature  of 
the  principles  by  which  these  adjust- 
ments are  made,  determines  the  relations 
of  a  concern  to  its  laborers,  to  competi- 
tors, to  customers,  and  to  the  public.  If 


74    HIGHER  EDUCATION  AND 

the  executive  comes  to  his  task  without 
a  mind  and  spirit  trained  to  an  appreci- 
ation of  human  relations,  he  is  not  likely 
so  to  synthesize  the  work  of  his  subor- 
dinates as  to  make  for  either  maximum 
efficiency  within  the  business  or  its  max- 
imum contribution  to  the  life  of  the 
State. 

The  term  "executive"  in  large  and 
highly  organized  concerns  is  likely  to 
mean  the  head  of  a  department.  A  large 
proportion  of  the  department  heads  now 
in  business  are  men  of  purely  empirical 
training.  Their  horizon  is  likely  to  be 
limited  and  to  center  too  much  in  the 
departmental  viewpoint.  They  may  per- 
haps be  able  to  see  the  whole  business, 
but  if  they  do,  they  will  probably  see 


BUSINESS  STANDARDS        75 

it  exclusively  from  the  inside.  There  is 
frequently  nothing  in  their  business  ex- 
perience that  has  made  them  think  of 
the  great  forces  at  work  in  society  at 
large.  As  the  bulk  of  business  has  been 
organized  in  the  past,  there  has  been  no 
department  in  which,  automatically  and 
in  the  regular  course  of  business,  a  view 
looking  outward  is  brought  to  bear.  If 
it  came  at  all,  it  was  reflected  back  from 
the  larger  relations  and  the  larger  social 
contacts  of  the  head  of  the  business. 
Many  general  executives  have  been  pro- 
moted from  the  position  of  head  of 
department  at  a  period  in  life  when 
their  habits  of  thought  had  become 
crystallized,  and  it  was  not  natural 
that  they  should  entirely  change  those 


76    HIGHER  EDUCATION  AND 

habits  with  the  change  in  their  respon- 
sibilities. 

Besides,  the  economics  of  competition 
and  a  strong  group  sentiment  among 
business  men  have  tended  to  make  them 
resist  social  influences  which  might  re- 
act upon  the  policies  of  their  own  busi- 
ness. Superficial  conclusions  drawn  from 
such  experiments  as  those  of  Pullman 
and  of  Patterson,  to  which  reference  has 
been  made,  have  seemed  to  justify  such 
resistance  and  have  fortified  men  in  the 
belief  that  business  and  response  to  so- 
cial influence  should  be  kept  separate  in 
water-tight  compartments. 

More  recently  men  have  been  coming 
to  understand  the  fundamental  defects 
in  the  Pullman  and  the  original  Cash 


BUSINESS  STANDARDS        77 

Register  plans  and  have  come  to  realize 
that  even  a  separate  welfare  department 
may  be  successfully  incorporated  in  a 
business,  if  only  certain  fundamental 
policies  are  followed  in  its  management. 
Still  more  significant  is  the  view  look- 
ing-outward  and  the  consequent  har- 
monizing of  social  and  business  motives, 
which  is  coming  in  the  ordinary  devel- 
opment of  business  policies  as  a  result 
of  their  more  fundamental  analysis. 

Perhaps  the  greatest  step  toward  a 
fuller  consideration  of  facts  on  the  out- 
side is  taken,  when  a  business  creates  a 
separate  department  of  employment.  It 
is  hard  to  see  how  the  head  of  an  em- 
ployment department  can  have  the  larg- 
est measure  of  success  if  he  sees  only  the 


78     HIGHER  EDUCATION  AND 

facts  on  the  inside.  A  comprehensive  ap- 
plication of  scientific  method  to  problems 
of  employment  leads  a  long  way  into 
analysis  of  the  social  facts  affecting  the 
people  who  are  employed. 

From  different  angles  the  same  thing 
is  true  in  other  departments  of  business, 
notably  so  in  the  case  of  advertising  and 
sales.  One  of  the  most  obvious  outside 
facts  which  affect  sales,  is  the  location 
and  density  of  the  population,  and  yet  it 
is  a  fact  which  frequently  is  neglected. 
Another  outside  fact,  which  ultimately 
advertisers  will  have  to  consider,  is  the 
consuming  power  of  population.  They 
have  been  very  keen  to  study  our  psy- 
chological reactions,  and  in  doing  this 
they  have  undertaken  the  entire  charge 


BUSINESS  STANDARDS        79 

of  the  evolution  of  our  wants.  But  they 
have  not  always  gone  at  their  work  from 
the  long-time  point  of  view.  Sometime 
they  will  have  to  take  account  of  the 
fact  that  unwise  consumption  impairs 
efficiency  and  depletes  the  purchasing 
power  from  which  advertisers  must  be 
paid. 

The  next  step  in  the  scientific  analy- 
sis of  business  is  to  provide  for  more 
ample  analysis  of  facts  on  the  outside. 
Weakness  at  this  point  explains  the  de- 
fects in  many  plans  for  the  welfare  of 
employees,  it  explains  the  defects  in  sci- 
entific management,  mentioned  above, 
and  it  explains  many  other  shortcom- 
ings in  projects  for  increasing  the  effec- 
tiveness of  business. 


8o    HIGHER  EDUCATION  AND 

But  men  who  approach  business  from 
the  standpoint  of  university  research  are 
not  free  from  the  same  danger.  In  their 
effort  to  orient  themselves  with  the  busi- 
ness facts,  they  get  the  business  point  of 
view  and  run  the  risk  of  centering  atten- 
tion too  much  on  materials  and  material 
forces.  Even  psychological  reactions  of 
men  and  women  may  be  analyzed  from 
the  standpoint  of  their  mechanics,  with- 
out ever  going  back  to  those  impelling 
motives  which  have  their  roots  in  the 
human  instincts  and  complex  social  re- 
actions of  which  the  men  and  women 
are  a  part. 

Approached  from  *he  standpoint  of 
scientific  method,  the  field  of  conflict 
between  different  interests  in  business 


BUSINESS   STANDARDS        81 

and  between  so-called  "  good  business  " 
and  "good  ethics"  becomes  measurably 
narrowed.  I  do  not  mean  to  give  sci- 
ence the  sole  credit  for  achievements 
along  this  line.  More  frequently  ad- 
vance in  moral  standards  has  been  forced 
on  unwilling  victims  through  legislation, 
public  opinion,  or  class  struggle,  and 
then  men  have  discovered,  as  a  happy 
surprise  after  the  event,  that  "  good 
ethics  "  was  profitable.  But  science  has 
done  something,  and  might  have  done 
still  more,  if  our  efforts  at  scientific  anal- 
ysis had  not  been  so  often  underweighted 
on  the  human  side.  These  very  discov- 
eries of  harmony  between  wholesome 
practice  and  good  business  constitute  a 
part  of  the  body  of  fact  of  which  a  truly 


82    HIGHER  EDUCATION  AND 

scientific  method  must  take  account. 
When  a  review  of  all  the  cases  in  which 
compulsion  has  changed  existing  meth- 
ods shows  an  almost  invariable  adapta- 
tion and  a  tendency  toward  better  re- 
sults after  the  level  of  competition  is 
raised,  a  man  of  scientific  training  im- 
mediately asks  the  question,  whether  a 
fundamental  law  is  not  at  work. 

A  glance  at  social  legislation  during 
the  last  century  reveals  some  interesting 
uniformities.  Every  step  in  the  devel- 
opment of  the  English  Factory  Acts  as 
they  stood  at  the  beginning  of  the  pres- 
ent war,  starting  with  the  first  Child 
Labor  Bill  in  1802  and  ending  with  the 
Shop  Regulation  Act  of  1912,  had  been 
taken  against  the  protest  of  the  most 


BUSINESS  STANDARDS        83 

vocal  elements  in  the  trades  concerned. 
In  nearly  every  case  investigation  will 
show,  either  that  the  requirements  of 
the  measure  enacted  fell  considerably  be- 
low the  practice  of  the  best  concerns,  or 
that  the  whole  industry  was  in  need  of 
some  outside  impulse  to  start  it  in  the 
way  of  more  efficient  organization.  As 
long  as  it  is  permissible  to  employ  five 
women  and  five  children  to  tend  five 
machines,  there  is  not  the  right  incen- 
tive to  make  adjustments  by  which  all 
five  of  them  can  be  tended  by  one  man. 
In  this  country  in  our  forty-nine  ju- 
risdictions we  have  been  going  forty-nine 
times  over  the  experience  of  England 
and  other  countries,  in  connection  with 
each  effort  to  force  up  the  competitive 


84    HIGHER  EDUCATION  AND 

level.  We  have  seemed  to  be  quite  un- 
able to  apply  the  most  obvious  lessons 
of  experience  either  at  home  or  abroad 
to  new  cases,  and  yet  essentially  the  same 
uniformity  of  adaptation  has  occurred 
here  as  abroad.  Like  our  employer, 
whom  a  strike  impelled  to  adopt  an 
advanced  policy  toward  labor,  we  find 
after  the  event  that  we  should  not  know 
how  to  do  business  under  the  standards 
in  force  before  the  law  compelled  a 
change. 

Enforcement  of  the  Sherman  Anti- 
Trust  Law  has  been  frequently  cited  as 
an  example  of  unwise  government  inter- 
ference. With  respect  to  many  of  the 
incidents  of  enforcements,  criticism  has 
been  well  founded.  But  the  net  result 


BUSINESS   STANDARDS         85 

of  that  enforcement  has  been  a  much 
sounder  body  of  law  on  the  important 
subject  of  fair  and  unfair  competition. 
Besides,  we  now  have  in  the  Federal 
Trade  Commission  the  beginnings  of  an 
administrative  organization  for  dealing 
with  the  whole  subject  of  monopoly  and 
restraint  of  trade.  And  more  than  all 
this,  we  have  a  better  prospect  than  ever 
before,  of  some  sort  of  mutual  respect 
between  government  and  business,  and 
of  honest  cooperation  in  working  out 
their  mutual  problems.  It  is  not  likely 
that  the  Anti-Trust  Law  has  prevented 
honest  men  from  earning  legitimate 
profits  from  legitimate  business  service 
to  anything  like  the  extent  which  would 
be  indicated  by  the  vigor  with  which  it 


86    HIGHER  EDUCATION  AND 

has  been  opposed.  But  even  if  it  has,  we 
have  received  something  for  the  price 
paid. 

And  so  the  list  might  be  lengthened, 
pure  food  and  drugs,  meat  inspection, 
public  service  regulation,  industrial 
safety,  and  the  rest,  —  in  nearly  every 
case,  from  a  purely  business  point  of 
view,  opposition,  in  so  far  as  it  related 
to  the  main  point  of  government  policy, 
has  been  a  mistake.  Refusal  of  the  busi- 
ness men  affected  to  accept  a  policy  of 
regulation  has  tended  to  shut  them  out 
of  the  councils  in  making  adjustments 
of  detail.  This  fact  has  hindered  the  gov- 
ernment in  performing  a  service  which 
in  most  cases  both  the  public  and  the 
business  needed  to  have  done. 


BUSINESS  STANDARDS        87 

Even  when  we  admit,  as  obviously 
we  must,  the  persistence  of  conflict  be- 
tween different  interests  with  respect  to 
a  large  mass  of  business  detail,  the  fact 
of  group  influences  and  social  control 
still  remains  an  important  consideration 
to  which  business  analysis  must  give  due 
weight.  There  has  been  a  large  mass  of 
business  in  this  country,  in  which  the 
community  has  been  unable  to  recog- 
nize any  productive  service ;  it  has  been 
regarded  only  as  a  means  of  acquisition 
for  those  who  pursue  it.  Legislation, 
public  opinion,  and  the  evolution  of 
enforceable  standards  within  particular 
business  groups  are  tending  all  the  while 
to  narrow  the  sphere  of  purely  acquisi- 
tive business.  With  respect  to  that  great 


88     HIGHER  EDUCATION  AND 

mass  of  business  which  has  both  an  ac- 
quisitive and  a  productive  side,  these 
forces  are  gradually  bringing  us  to  an 
attitude  of  mind  in  which  we  regard 
gain  as  a  by-product  of  service. 

The  public  is  also  recognizing  that 
the  purpose  of  goods  and  services  is  to 
promote  individual  and  community  wel- 
fare, and  as  fast  as  public  policy  to  that 
end  can  be  worked  out,  it  is  carrying 
emphasis  even  beyond  specific  products 
and  services  to  the  social  ends  for  which 
these  products  and  services  exist.  In 
these  ways  society  too  is  trying,  clum- 
sily perhaps,  to  take  a  long-time  view  of 
its  business  and  to  conserve  the  human 
values  that  make  for  progress. 

Obviously  it  is  but  a  partial  and  in- 


BUSINESS  STANDARDS        89 

complete  analysis  of  a  business  situation 
that  omits  these  human  factors ;  a  work- 
ing policy  that  fails  to  anticipate  their 
force  and  then  to  reduce  the  zone  of 
conflict  to  its  lowest  limits  is  neglecting 
an  important  element  in  the  definition 
of  long-time  efficiency.  And  business 
men  are  beginning  to  see  this. 

A  few  weeks  ago  the  manager  of  a 
large  department  store  in  San  Francisco 
was  kind  enough  to  show  me  his  record 
of  departmental  profits  for  a  number 
of  months.  The  fluctuation  in  relative 
profits  of  different  departments  month 
by  month  was  apparent,  especially  the 
fact  that  after  a  certain  month  several  de- 
partments which  had  previously  earned 
high  profits  became  relatively  much 


90    HIGHER  EDUCATION  AND 

less  profitable.  I  asked  the  manager  to 
explain,  and  he  did  in  this  way :  At  the 
time  when  the  change  occurred  a  new 
policy  had  been  inaugurated  by  which 
employment  of  help  had  been  central- 
ized and  standardized  for  the  whole 
concern.  As  a  result,  when  certain  de- 
partments which  had  been  decidedly 
sub-standard  with  respect  to  wages  were 
brought  up  to  standard,  they  were  un- 
able to  earn  anything  like  the  profits 
which  they  had  previously  shown. 

Without  going  into  the  question  of 
the  connection  between  high  wages  and 
profits,  of  which  this  incident  in  my 
opinion  was  an  exception,  it  was  clear 
to  the  manager  as  to  me  that  the  in- 
crease in  wages  in  these  particular  de- 


BUSINESS  STANDARDS        91 

partments  had  been  accompanied  by  an 
immediate  loss  in  profits.  Furthermore, 
the  manager  was  unable  to  determine, 
from  figures  available  before  and  after 
the  change,  that  this  loss  had  been  di- 
rectly compensated  by  gains  in  other 
departments.  In  order  to  get  his  view- 
point concerning  the  change  at  issue,  I 
asked  him  two  questions :  ( i )  Why  was 
he  willing  to  make  a  change  of  such 
a  fundamental  character  without  being 
able  to  ascertain  in  advance  whether  or 
not  it  would  be  profitable  ?  (2)  In  the 
absence  of  facts  that  could  be  incor- 
porated in  the  accounts,  was  it  his  be- 
lief that  the  change  would  in  time  be 
profitable,  and  if  so,  how  did  he  reach 
his  conclusion  ? 


92     HIGHER  EDUCATION  AND 

His  response  to  the  first  question  re- 
vealed to  me  an  intensely  natural  but 
nevertheless  complex  motive.  He  said, 
substantially,  that  he  was  confident  that 
standardized  employment  was  the  only 
acceptable  policy,  from  the  standpoint 
of  the  general  manager.  Given  the  ne- 
cessity of  standardizing,  it  was  necessary 
for  the  general  reputation  of  the  business 
to  standardize  upward  rather  than  down- 
ward. He  wanted  his  business  to  be 
regarded  as  one  in  which  the  best  stand- 
ards of  employments  obtained.  Further- 
more, he  added,  "California  will  soon 
have  a  minimum  wage  law,  and  I  want 
this  business  to  be  well  in  advance  of  any 
wage  standards  which  may  be  imposed 
by  law." 


BUSINESS  STANDARDS        93 

Answering  the  second  question  more 
specifically,  the  manager  recognized  the 
advertising  value  of  a  reputation  for  hav- 
ing good  conditions  of  employment. 
He  had  discovered  no  tendency  for  gen- 
eral profits  to  diminish  or  for  the  rate 
of  increase  to  be  retarded  more  than 
temporarily.  In  the  absence  of  definite 
facts  to  the  contrary  he  considered  it 
safe  to  assume  that  as  soon  as  the  busi- 
ness should  become  adjusted  to  the  new 
standards,  standardization  of  wages  up- 
ward would  be  profitable  for  the  busi- 
ness as  a  whole.  He  wanted  to  make 
the  change  voluntarily  and  to  commence 
operating  successfully  on  the  new  basis 
in  advance  of  competitors. 

It  is  scarcely  possible  to  discuss  this 


94    HIGHER  EDUCATION  AND 

sort  of  business  situation  with  a  pro- 
gressive manager,  without  feeling  that 
he  does  not  approach  business  exclu- 
sively from  the  standpoint  of  gain ;  in 
other  words,  to  use  the  phrase  of  Adam 
Smith,  he  is  not  exclusively  an  "  eco- 
nomic man."  The  manager  of  a  mod- 
ern business,  on  the  contrary,  is  a  man 
very  much  like  the  rest  of  us,  and  being 
such  a  man  he  is  first  of  all  desirous  of 
conforming  to  whatever  standards  are  in 
way  of  acceptance  by  that  part  of  so- 
ciety in  which  he  moves.  Obviously, 
these  standards  are  made  up  of  both 
selfishness  and  altruism,  with  selfishness 
tending  all  the  time  to  become  more 
enlightened  as  society  advances. 

As    we    come    to    distinguish    more 


BUSINESS  STANDARDS        95 

clearly  between  reward  for  service  and 
mere  one-sided  gain,  there  occurs  a  par- 
allel change  in  men's  motives;  they  be- 
come more  sensitive  to  social  disfavor 
and  to  social  esteem  and  less  and  less 
willing  to  devote  their  lives  to  activity 
by  which  no  one  but  themselves  is  ben- 
efited. In  this  reaction  of  altruism  with 
enlightened  selfishness  there  emerges  in 
men's  minds  a  new  concept  of  their  own 
interest  and  a  better  understanding  of 
the  kind  of  business  policy  that  in  the 
long-run  brings  them  the  greatest  re- 
ward. Of  course,  this  does  not  mean 
that  enlightened  selfish  interest  has 
ceased,  or  that  it  will  ever  cease,  to  be 
a  motive  force  in  business.  But  there 
is  a  vast  difference  between  selfishness 


96    HIGHER  EDUCATION  AND 

untempered  with  other  motives  and 
selfishness  eager  for  the  esteem  of  one's 
fellows. 

Clearly  it  is  a  task  of  higher  educa- 
tion to  help  promote  response  to  the 
more  enlightened  motives.  The  diffi- 
culty which  even  men  of  advanced 
university  training  have  in  taking  full  ac- 
count of  human  factors  indicates  some- 
thing of  the  nature  and  importance  of 
the  task.  The  so-called  "scientifically 
trained"  manager  tends  to  undervalue 
the  human  factor  of  his  equation.  His 
analysis  is  likely  to  be  overweighted  on 
the  material  side.  When  the  university 
starts  —  as  it  is  starting  and  should  start 
—  to  train  future  executives,  it  needs  to 
analyze  its  own  problem,  and  take  full 


BUSINESS  STANDARDS        97 

account  of  the  dangers  against  which 
it  has  to  guard.  Otherwise  the  training 
itself  will  be  overweighted  on  the  ma- 
terial side  and  will  perpetuate  the  weak- 
ness that  it  ought  to  correct. 

The  greatest  danger  in  this  connec- 
tion, as  I  see  it,  arises  out  of  the  dis- 
tinction between  the  so-called  "  cultural " 
and  the  "vocational"  point  of  view. 
This  distinction  comes  to  us  with  a 
large  mass  of  traditional  authority,  and 
we  have  classified  subjects  and  erected 
barriers  on  the  assumption  that  the  dis- 
tinction is  real.  As  far  as  the  training 
of  business  executives  is  concerned,  I 
am  confident  that  the  distinction  is  one 
which  ought  never  to  be  made.  It  is  a 
great  misfortune,  when  young  men  and 


98     HIGHER  EDUCATION  AND 

women  who  are  preparing  for  a  serious 
career  are  permitted  to  think  of  culture 
as  a  non-functioning  ornament ;  equally 
unfortunate  is  it  for  them  to  think  of 
their  prospective  vocations  as  activities 
devoid  of  cultural  association. 

A  few  days  ago  a  student  who  had 
already  selected  his  profession  and  was 
anxious  to  be  about  it  confided  to  me, 
as  many  others  have  done,  how  distaste- 
ful he  was  finding  the  task  of  "  work- 
ing off  his  culture."  Does  any  one  really 
suppose  that  the  sophomore  who  is 
"  working  off  his  culture  "  under  faculty 
compulsion,  in  order  to  get  his  college  de- 
gree, is  really  absorbing  from  his  study 
anything  which,  as  the  faculty  assumes, 
makes  him  a  better  man  and  yet,  as  he 


BUSINESS  STANDARDS        99 

himself  believes,  contributes  nothing  to 
effectiveness  in  his  profession  ?  Or  take 
the  case  of  the  man  who  devotes  him- 
self with  professional  earnestness  to  his 
two,  three,  or  four  years  of  college  work 
—  will  he  find  that  he  has  invested  his 
time  and  his  money  on  a  purely  orna- 
mental luxury  that  has  no  relation  to 
his  later  work  ? 

The  first  great  element  of  training 
which  the  university  can  give  to  future 
business  men  is  a  mastery  of  scientific 
method  as  a  means  of  analyzing  prob- 
lems and  synthesizing  results.  Quite  as 
fundamental  as  this  is  the  development 
of  an  intelligent  and  sympathetic  ap- 
proach to  questions  of  human  relation- 
ship. Only  the  beginning  steps  in  the 


ioo    HIGHER  EDUCATION  AND 

direction  of  business  efficiency  can  be 
taken  while  attention  is  confined  to  the 
material  and  mechanistic  side  of  busi- 
ness organization.  No  secure  basis  for 
permanent  efficiency  can  be  established 
until  we  are  prepared  to  go  deeply  into 
the  question  of  human  motives  and  to 
understand  something  of  the  complex  re- 
actions that  come  from  individual  and 
group  associations.  Without  such  a  basis 
we  cannot  hope  for  a  nationally  effec- 
tive business  organization. 

Business  is  a  form  of  cooperation 
through  which  men  exercise  control  over 
natural  forces  and  thereby  produce  things 
with  which  to  satisfy  human  wants.  Any 
subject  well  taught,  which  gives  an  in- 
sight into  human  relations  or  into  nature 


BUSINESS  STANDARDS      101 

and  man's  control  over  it,  will  help  pre- 
pare a  person  to  deal  with  the  intricate 
problem  of  human  relations  in  business 
—  that  is,  if  the  student  has  studied  the 
subject  in  an  attitude  of  mind  to  see  its 
bearing  on  what  he  is  preparing  to  do. 
The  question  is  not  so  much  one  of  too 
few  or  too  many  so-called  culture  sub- 
jects, but  rather  of  the  attitude  of  mind 
in  which  all  subjects  are  undertaken.  It 
is  a  question  of  getting  such  a  survey  of 
the  great  facts  of  human  experience  and 
of  so  pointing  their  significance  as  to 
enable  men  to  approach  a  problem  of 
human  relationship  with  sympathy  and 
something  of  a  long-time  dynamic  view- 
point. When  this  is  accompanied  by 
a  mastery  of  scientific  method,  the  foun- 


UN1VERSITY  OF  CALIFORNIA 
^A  UAUWARA  COLLEGE 


102     HIGHER  EDUCATION  AND 

dations  are  reasonably  secure.  Without 
such  foundations,  secured  either  in  col- 
lege or  out,  analysis  of  problems  in  a 
specialized  business  field  is  almost  sure 
to  be  one-sided  and  incomplete. 

The  kind  of  professional  training 
that  I  would  suggest  for  the  future 
business  executive  would  be  laid  on  the 
foundation  of  a  college  course  of  two, 
three,  or  four  years  in  which  the  view- 
point and  the  varied  methods  of  study 
in  several  diverse  branches  of  knowledge 
had  been  thoroughly  instilled.  When  the 
student  passed  to  the  professional  study 
of  business  he  would  be  expected  to 
master  the  fundamentals  of  business  or- 
ganization and  management,  including 
the  basic  elements  of  subjects  like  ac- 


BUSINESS  STANDARDS       103 

counting,  finance,  and  other  divisions 
of  organization  common  to  all  lines  of 
business.  All  of  these  studies  would  be 
pursued  with  constant  reference  to  the 
fact  that  business  is  carried  on  in  a  com- 
munity in  which  certain  public  policies 
are  enforced  and  in  recognition  of  the 
fact  that  business  should  conform  to 
these  policies  and  help  to  make  them 
effective  in  contributing  to  public  wel- 
fare. 

As  the  student  advances,  the  course 
would  proceed  toward  greater  and  greater 
specialization,  and  would  finally  culmi- 
nate in  an  intensive  study  of  some  fairly 
narrow  business  problem,  pursued  until 
the  student  has  mastered  it  in  principle 
and  in  detail.  The  result  of  his  study 


104    HIGHER  EDUCATION  AND 

would  be  set  forth  in  dignified  readable 
English  which  an  intelligent  layman 
could  comprehend  and  which  would 
make  the  article  acceptable  for  publica- 
tion in  a  journal  of  standing. 

Professional  study  of  business,  then, 
should  give  students  a  comprehensive 
many-sided  survey  of  business  and  a  thor- 
ough grasp  of  scientific  method  as  used  in 
analyzing  business  facts.  It  should  pre- 
pare the  student  to  think  complicated 
business  problems  through  to  the  end 
and  to  put  the  results  of  his  thinking  to- 
gether into  an  effective  working  plan. 
Finally,  it  should  maintain  an  atmos- 
phere in  which  business  problems  are 
regarded  in  a  large  and  public-spirited 
way. 


BUSINESS   STANDARDS       105 

We  are  well  under  way  with  profes- 
sional training  for  business ;  but  if  stu- 
dents fail  to  get  the  general  educational 
foundation  for  it,  it  will  not  accomplish 
the  best  results.  If  the  two,  three,  or  four 
years  of  college  study  is  regarded  as  some- 
thing purely  ornamental  and  irrelevant, 
while  they  are  getting  it,  if  it  fails  to 
arouse  an  appreciation  both  of  scientific 
method  and  of  human  values,  or  if  these 
values  are  thought  of  as  something  to  for- 
get when  the  student  comes  to  the  anal- 
ysis of  practical  problems,  the  univer- 
sity will  not  have  done  what  it  might  do 
for  the  promotion  of  high  standards  of 
efficiency  in  business. 

In  all  of  the  discussions  I  have  tried 
to  point  out  how  emphasis  in  business 


106    HIGHER  EDUCATION  AND 

is  gradually  shifting  from  acquisition,  to 
production  and  service ;  how  there  are 
gradually  evolving  in  business,  profes- 
sional standards  of  fitness,  of  conduct,  and 
of  motive;  and  how  more  and  more  these 
standards  enter  into  the  measuring  of 
business  success.  Our  educational  assump- 
tions still  rest  too  largely  on  the  old  dollar 
standard  of  success  with  its  well-known 
inferences  about  the  blood-and-iron 
equipment  with  which  that  success  can 
be  attained. 

Psychologists  tell  us  that  we  tend  to 
get  what  we  expect.  If  we  fail  to  create 
enthusiasm  for  the  opportunity  for  serv- 
ice in  business;  if  we  assume  that  young 
persons  who  enter  business  are  going  to 
measure  their  returns  in  dollars  alone ; 


BUSINESS  STANDARDS       107 

or  if  we  continue  to  feature,  as  we  have 
done,  the  break  between  the  so-called 
"  cultural "  and  the  professional  parts  of 
the  university  course,  there  will  be  danger 
that  we  shall  continue  to  get  the  thing 
for  which  we  plan. 

There  can  be  no  doubt  that  many  of 
our  old  assumptions  about  the  relative 
dignity  and  social  distinction  attaching 
to  different  kinds  of  study,  as  well  as  the 
assumption  of  a  purely  mercenary  mo- 
tive in  business,  have  impeded  a  whole- 
some reaction  between  higher  education 
and  business  standards.  These  assump- 
tions have  created  an  atmosphere  —  an 
objective  and  subjective  attitude  of  mind, 
a  set  of  motives  and  desires,  of  appreci- 
ations and  valuations,  all  of  which  stand 


io8     HIGHER  EDUCATION  AND 

in  the  way  of  the  most  far-reaching  edu- 
cational results. 

So  far  as  these  assumptions  can  be 
rationally  explained,  they  rest  on  ideas 
that  are  in  part  mistaken,  in  part  exag- 
gerated, and  in  part  obsolete.  The  appli- 
cation of  scientific  method  to  business 
has  created  an  entirely  new  relation- 
ship between  business  and  education. 
Scientific  analysis  and  social  policy  are 
establishing  a  new  connection  between 
the  material  and  the  human  facts  of 
business.  In  the  new  atmosphere  the 
business  executive  requires  those  fine 
qualities  of  mind  and  spirit,  and  the 
ability  to  command  these  qualities  for  a 
given  task,  which  peculiarly  it  is  the 
work  of  the  university  to  cultivate. 


BUSINESS  STANDARDS       109 

In  proportion  as  universities  have  vig- 
orously undertaken  this  work,  and  have 
applied  scientific  method  to  their  own 
problem  of  articulating  it  with  higher  ed- 
ucation in  general,  the  line  of  approach 
to  professional  business  training  has  be- 
come increasingly  clear.  Among  the 
notable  developments  of  the  past  decade 
has  been  a  shifting  of  emphasis  from  the 
training  of  specialists  to  the  training  of 
business  executives.  As  preparation  for 
executive  work  comes  to  be  generally 
recognized  as  an  appropriate  field  for 
systematic  professional  study,  the  stand- 
ards that  scientific  method  has  already 
achieved  will  become  fixed  and  better 
standards  of  business  efficiency  and  serv- 
ice will  emerge. 


ffiitetfitie 

CAMBRIDGE  .  MASSACHUSETTS 
U  .   S   .  A 


J/ 


THE  LIBRARY 

UNIVERSITY  OF  CALIFORNIA 
Santa  Barbara 


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